Seller renewed lease under market while under contract

[Gurjot Grewal]

Hello BP,

I thought I had my first investment deal ready to close. We are past the inspection period, waiting on loan approval. But today I find out the seller renewed the tenant on one side of the duplex at 950/month for a full year. My property manager believes market rents are in the 1200-1300 range. I ran all my numbers at 1250/side. Leases were set to expire in febuary. 

If I close now my roi is only 2.3%. This is now a bad deal. I also think the dscr is too low so maybe the lender will deny my loan. 

I have a financing and appraisal contingency. What other options do I have to get out if this contract without losing my EMD? Would appreciate any help.